Nintendo makes its Wi-Fi move

Bianca Knop of Vancouver, B.C., tries her hand at the Nintendo DS with a Wi-Fi connection along with other gamers at Nintendo's headquarters in Redmond.

STEVE RINGMAN / THE SEATTLE TIMES

Antonio Rodriguez of Mexico City is engrossed in his game as Nintendo shows off its Wi-Fi gaming with "Mario Kart DS" earlier this month at its headquarters in Redmond.

STEVE RINGMAN / THE SEATTLE TIMES

Craig Harris of San Francisco uses Wi-Fi at the Nintendo headquarters to play online against players in Montreal.

Nintendo: A gaming veteranHeadquarters: Kyoto, Japan. North American arm is based in Redmond.

Founded: In 1933, as an unlimited partnership named Yamauchi Nintendo & Co. Spent decades as a playing-card manufacturer, branching into games in the 1960s. Developed first video-game system in 1975.

Why you can't count it out: For the year ended March 31, 2005, Nintendo reported $817 million in profit on $4.8 billion in sales. It had $7.4 billion in cash. In the most recent quarter, ended Sept. 30, it had sales of $890 million and profit of $189 million.

Source: Nintendo

Third in consoles

Sony PlayStation 2: 96 million units

Microsoft Xbox: 21.9 million

Nintendo GameCube: 18.8 million

But first in handhelds As of March, Nintendo had sold 67 million units of its Game Boy Advance handheld player.

Darren Smith has waited a long time for Nintendo to go online. He's spent years at the company tinkering with online features, only to see Nintendo sit out the first round of Internet-based gaming while Microsoft and Sony moved ahead. Nintendo, whose North American arm is based in Redmond, refused to jump in until the time was right.

Only now, a year after it debuted its DS portable game player, has Nintendo made its move. And Smith has been busy putting all the pieces in place.

"We had really been looking at online for years," said Smith, who is manager of network marketing at Nintendo's Redmond offices. "We knew it would come together in the DS era."

The company has launched a wireless gaming service, called Nintendo Wi-Fi Connection, that allows DS users around the world to play each other over the Internet. There are only two games with the service so far, but more are on the way.

And it's embracing a new philosophy as video gaming, already a $10 billion industry, becomes a higher-stakes and more expensive business. Rather than compete directly with Microsoft and Sony, Nintendo is pursuing an alternate path to create breakout games and technologies.

Reggie Fils-Aime, Nintendo of America's sales and marketing chief, compares the situation to digital music players. Sony was so focused on creating a better Discman that it wasn't prepared for the rise of MP3 players, he said. Apple's iPod changed the game even more. Southwest Airlines did the same in its industry.

"These disruptive technologies typically appeal to new customers," he said recently at a Nintendo media summit. "Done successfully, they really blow open a marketplace."

Pressures grow

The company is facing no small amount of industry pressures. Sony and Microsoft are competing heavily with next-generation consoles aimed at becoming the entertainment hub of the living room.

The Xbox 360, which debuted last week, and Sony's upcoming PlayStation 3 are expensive, sophisticated consoles that are ratcheting up the complexity of the video-game market.

Nintendo is also developing a next-generation console, code-named the Revolution, but is increasingly being considered a smaller industry player whose strength lies in the portable and handheld niche.

Add to that the decline expected in Nintendo's core audience of boys age 8 to 14. The Census Bureau expects fewer boys in that age group in the future, Fils-Aime said. "That's why we're stepping back and saying more of the same is not going to drive this industry," he said. "We have to disrupt the marketplace that we helped create 20 years ago in order to be successful moving forward."

Fils-Aime points to its "Nintendogs" DS game as an example of its dare-to-be-different strategy. The game gives users a virtual puppy to feed, care for and enter into competitions. Players can command their dogs by speaking into the DS' built-in microphone.

Turning point

Nintendo is looking to its Wi-Fi service as another turning point. The company has partnered with Wayport, a wireless hot-spot provider, to make the service available free at McDonald's fast-food restaurants. Financial terms of the deal have not been disclosed.

"The customer base is not dissimilar to ours," said Perrin Kaplan, a Nintendo spokeswoman. In Japan, the company has set up similar hot spots at video-game stores, where young people tend to spend time, Kaplan said.

Users also can connect to the service through a home Wi-Fi network. Those without one need an additional device to connect wirelessly through the home's wired network (the device allows only the DS to connect).

The service lets only DS players connect to each other to play games, not to browse the Web or check e-mail. Upgrading to that capability would be simple, Smith said, but Nintendo has not announced any plans to do so.

Sony's PSP handheld player, a more sophisticated system that can play music and movies, includes a Web browser for wireless access.

Technical hurdle

The biggest technical hurdle to setting up the network was figuring out how much of the connection could be done through the DS and how much should be taken care of behind the scenes, said Smith, the network marketing manager.

In its research, the company set up a Wayport hot spot in Kyoto, Japan, to test the limits of the system.

The online capabilities through Sony's PSP are more functional than what you get with the DS, said Wes Nihei, editor of Game Pro Magazine. But the games you can play online with the DS are more fun, he added.

"It's really kind of neat to be out there and know that you can connect with strangers," said Nihei, who played against people in Germany when he tested out the system.

Only two games, "Mario Kart DS" and "Tony Hawk's American SK8land," are compatible with the Wi-Fi service, and one more title is expected by the end of the year.

Nintendo said last week that it has sold about 112,000 copies of "Mario Kart DS" in the U.S. Since the game's release, nearly 52,000 unique users had logged onto the Wi-Fi network to play it.

The Wi-Fi service is a good move for Nintendo, though the company is still playing catch-up to Sony's PSP, which was wireless out of the box, said Mike Goodman, an analyst covering the industry for the Yankee Group.

"They deserve credit this time because at least they're not letting the market pass them by," Goodman added. "They totally missed the boat on online game play when it came to GameCube."